Unemployment benefit scam rocks Vaud

Last week, the regional newspaper 24 Heures, uncovered a fraudulent scheme allegedly involving two workers from the union Unia, which may have cost Vaud’s social security system as much as CHF 3 million.

The alleged fraud is centred on the construction industry, where bosses of small businesses along with two staff from the union Unia managed to deceive the canton’s unemployment fund. According to an ongoing criminal enquiry, around CHF 3 million was paid by the state to compensate fictional employees.

Twelve small businessmen and two Unia employees are now behind bars, said the newspaper. Since at least as early as 2013, a system of successive bankruptcies was employed to pocket payments made to compensate fictitious employees. The payments, known as indemnités en cas d’insolvabilité (ICI), are intended to compensate employees when companies go bust.

As bankruptcy neared, new fictitious employees would be declared to the canton’s unemployment fund. Upon bankruptcy, the unemployment fund would pay up to four months salary in relation to the fictitious employees in the form of unpaid salaries.

The fraud reveals the surprising way in which the system works. The unemployment fund appears to request little evidence before making these payments. Bertrand Bühler, the prosecutor in charge of the case, said that the State Secretariat for Economic Affairs (SECO) only requires the unemployment fund to check the likelihood that the employees work for the company in difficulty.

Furthermore, a worker working illegally can receive money from the state for unpaid salaries. All the fraudsters needed to do was to declare that an employee worked for the company.

According to François Vodoz, from the Caisse cantonale de chômage, to qualify for ICI, there is no requirement to have paid social security contributions or to have a valid work permit.

At this stage it is impossible to know if the unemployment fund will be able to recover the lost money. In addition, there is nothing to suggest that anyone working for the unemployment fund was involved in the fraud, according to the public prosecutor. So far there has been no internal investigation. Every two years, unemployment funds are audited, something which last took place in 2015, when nothing was picked up.

Every year between CHF 3 and 6 million are paid to compensate unpaid salaries in relation to around 100 bankrupt companies in Vaud. In 2016, the total was CHF 4.7 million, around 1% of the total unemployment benefits paid out in the canton.